due diligence Posts

A number of commenters have asked me to weigh in on the lively debate that emerged from David Roodman’s Microfinance Open Book Blog about transparency–not only on Kiva, but really about all attempts to make philanthropy more direct, starting with the pioneering efforts of Save the Children in 1940.

I’ve hesitated about weighing in–mostly because we have shared war stories, best practices, and worst moments with our friends at Kiva. We know that they are classy folks who know how to work constructively with feedback. And no one has written more openly than Matt Flannery has about the ups and downs of starting a new organization. So I have wondered what we could add to the debate.

Upon reflection, though, I do want to add a couple of things. It’s partly because, as I reflect on this nascent space of direct philanthropy enabled by technology–including GlobalGiving, DonorsChoose, GiveIndia, and others–I think we have a collective responsibility to keep pushing the envelope on transparency and authenticity of the experience.

Let’s face it: since the space is so new, we don’t always know what works. So we keep trying things, based on what we think will work. Sometimes we get it right, and often we find we can improve.

Overall, we provide an enormous amount of information and transparency to our users about the organizations and projects on the site. We try to put the salient information on project home pages and provide links to more detailed information. At the beginning, we provided far too much information on the home pages. Users told us they couldn’t see the forest for the trees – they felt overwhelmed and were paralyzed into inaction. Over time, we have gotten better in achieving a balance, and users tell us that they like our presentation much better now. Most of them feel we are giving them what they want.

But we can always do better.

For example, though the overwhelming majority of projects on the site are run by the equivalent of US 501(c)3 non profits, a few are run by self-help groups and community coops, which are sort of a hybrid type legal form. We even work with a handful of socially oriented for-profit companies that represent a new wave of entrepreneurs trying to leverage business principles to promote the common good. According to IRS guidelines, all of these different organizations are eligible to receive donations as long as they are carrying out a charitable purpose that is not possible under normal market conditions. Regardless of their structure, all are subject to our rigorous due diligence process. When these organizations list projects on GlobalGiving, we monitor their expenditures to make sure they are not making a profit from the donations.

We’ve received feedback that we should make this information more prominent on the project pages to make it clear to potential donors. That is a fair point, and we have in fact been considering making these categorizations visible, including a “for-benefit” category for these organizations that aren’t equivalent to US 501(c)3s. My guess is that we will find that some donors are specifically attracted to this type of organization.

One of the positive things about the web is that we can get feedback – and respond to it – much faster than we could imagine back in the 20th century. Case in point: we recently piloted getting beneficiary feedback (via text message) in Kenya. We ended up with an incredibly rich dialogue between beneficiaries and donors that ultimately led to the beneficiaries moving on to work with another organization, and the original organization closing up shop.

We’re constantly looking for more ways to get that feedback more quickly, and from more people. We even put in place what may be the first-ever philanthropic guarantee – the GlobalGiving Guarantee. This give donors a powerful way to tell us if they are unhappy in any way, and signals to them that we are serious about listening. And it gives us a chance to address the issue not only for that donor, but for all donors.

I admire how Matt and Premal have responded to the debate over at Kiva. Their response sets an admirable standard for speed and transparency. (And in that context, if you have any ideas about how we could get more feedback from more people faster, please let us know…!)

Earlier today, Dennis Whittle was looking at the Global Open Challenge leaderboard over John’s shoulder.
“Can you believe it? This page is getting more traffic than our homepage!” John said.
“Naturally. This is where the action is,” I said.

Meanwhile, our accountant James has been clicking the refresh screen every 2 minutes. “Look, an organization just overtook the #5 spot!”
“What does it all mean?” Dennis asked. “This is the most dynamic thing on our site. I was at a conference, and someone mentioned his experience getting on the site and this leaderboard in the same breath.”

I am realizing that it all adds up to something different than we ever expected.

Now, I think our impact comes by transforming nonprofits to be more effective, more responsive, and more successful in turning those million little earth changing ideas into a better world.

This transformation comes in the first 30 days, if it comes at all. We train organizations on social media. Some adopt the best practices. Then we test everyone.

Those who fail still gain, sometimes even more, because the staff come back with a new hunger for learning. That hunger is what the official aid guys have been struggling to create for decades. And we get it for free, because everyone wants to be noticed and validated on the leaderboard.

It takes failure before some realize that we mean it when we say that they own their success. The work they do determines the funds they raise, not some granting foundation. Regular people empower the organization, especially when the people see they are part of something meaningful, a community with a cause. This dynamic is why the leaderboard matters.

As a PhD neuroscientist and a teacher, I fully believe testing and failure is how we make progress. Scientific research is about learning through failure. The Open Challenge is a test of whether nonprofits have a sustaining community of supporters.

“We regularly updated our supporters on the fruits of their labor and during the final weeks of the competition.”

“We pointed our supporters directly to the real-time standings.”

“Many of our supporters later told us that as the competition entered its final days, they wore out the refresh buttons on their browser keeping tabs on the competition.”

“Our supporters were 100% emotionally invested in the competition and did whatever they could to help Critical Exposure win.”

“They actually wanted more updates from us!”

What it means:

A community based organization in Zimbabwe can now compete with a 501(c)3 nonprofit in New York City, if enough people care about them. What matters is how passionate their supporters are in advocating on behalf of the great work the organization is doing.

GlobalGoodness: the people, ideas, and lessons that drive GlobalGiving forward.